Yesterday, the U.S. Treasury Department, after many veiled threats from the President, finally designated China as a currency manipulator, something no President has done since the Clinton era in the mid-‘90s. The move comes after China’s central bank allowed its currency to weaken, falling to as low as 7.14 against the dollar overnight, amid the ongoing trade dispute that has rocked global markets. In a press release the Treasury Department stated ‘Secretary Mnuchin, under the auspices of President Trump, has today determined that China is a Currency Manipulator’ adding ‘As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions’.
The statement went on to say, ‘In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past’ and that ‘The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain unfair competitive advantage in international trade’.
Hours before the announcement, Trump had already taken to social media, naturally, to tell the world his thoughts again. He tweeted ‘China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!’ adding ‘China is intent on continuing to receive the hundreds of Billions of Dollars they have been taking from the U.S. with unfair trade practices and currency manipulation. So one-sided, it should have been stopped many years ago … used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore!’.
Let’s not forget, one of Trump’s election campaign pledges was, apart from lifting import tariffs to 45%, was to name China a currency manipulator.
China has hit back at the allegations in an editorial in the People’s Daily, the official newspaper of the government, that also does not pull any punches. It accuses the US of ‘deliberately destroying international order’ asserting that ‘The responsibility of big countries is to provide the world with stability and certainty while creating conditions and opportunities for the common development of all countries’, however ‘some people in the United States do just the opposite’.